Effects of Border Price Changes on Agricultural Wages and Employment in Mexico

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Abstract

This paper measures the impact of North American Free Trade Agreement–induced real
border price changes of Mexican imports and exports on wages and employment of agricultural
workers in Mexico. I find that changes in real border prices of crops did not affect
agricultural wages. On the other hand, increases in the real price of vegetables (main
agricultural export) were associated with an increase in employment in the cultivation
of vegetables, whereas the drop in the real price of corn (main agricultural import)
reduced the employment in the corn sector. This is in line with the predictions of
neoclassical trade theory: in the absence of mobility costs or sector-specific skills,
factors moved smoothly from import-competing sectors into export-competing sectors.

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